What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 349 added, 129 removed, 812 unchanged (37% of the section changed)

1 unchanged sentence

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited) March 31,

(Unaudited) June 30,

2021 December 31,

7 unchanged sentences

Total Securities 208,472 145,400

Loans, Net of Allowance for Loan Losses of $ 12,725 and $ 12,771 at March 31, 2021 and December 31, 2020, Respectively

Loans Held for Sale 11,409 —

Loans, Net of Allowance for Loan Losses of $ 11,544 and $ 12,771 at June 30, 2021 and December 31, 2020, Respectively

995,902 1,031,982

Premises and Equipment Held for Sale 795 —

Premises and Equipment, Net

5 unchanged sentences

$ 1,461,613 $ 1,416,720

Deposits Held for Sale $ 102,557 $ —

Non-Interest Bearing Demand Deposits 368,452 340,569

14 unchanged sentences

Common Stock, $ 0.4167 Par Value;

35,000,000 Shares Authorized, 5,680,993 Shares Issued and 5,434,374 and 5,434,374 Shares Outstanding at March 31, 2021 and December 31, 2020, Respectively

35,000,000 Shares Authorized, 5,680,993 Shares Issued and 5,409,077 and 5,434,374 Shares Outstanding at June 30, 2021 and December 31, 2020, Respectively

Capital Surplus

2 unchanged sentences

51,146 51,132

Treasury Stock, at Cost ( 246,619 and 246,619 Shares at March 31, 2021 and December 31, 2020, Respectively)

Treasury Stock, at Cost ( 271,916 and 246,619 Shares at June 30, 2021 and December 31, 2020, Respectively)

( 5,655 ) ( 5,094 )

5 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(Dollars in thousands, except share and per share data)

13 unchanged sentences

NET INTEREST AND DIVIDEND INCOME 9,934 10,321 19,911 20,854

Provision For Loan Losses — 2,500

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,977 8,033

(Recovery) Provision For Loan Losses ( 1,200 ) 300 ( 1,200 ) 2,800

NET INTEREST INCOME AFTER (RECOVERY) PROVISION FOR LOAN LOSSES 11,134 10,021 21,111 18,054

NONINTEREST INCOME

3 unchanged sentences

Net Gain on Sales of Loans 31 441 117 568

Net Gain (Loss) on Securities 447 ( 438 )

Net Gain on Securities 11 517 458 79

Net Gain on Purchased Tax Credits 17 16 35 31

Net Gain on Disposal of Fixed Assets — 17

Net (Loss) Gain on Disposal of Fixed Assets ( 3 ) — ( 3 ) 17

Income from Bank-Owned Life Insurance 136 138 273 277

Other Income 180 14

Other Income (Loss) 31 ( 252 ) 211 ( 238 )

TOTAL NONINTEREST INCOME 2,219 2,648 5,393 4,520

11 unchanged sentences

Amortization of Intangible Assets 503 532 1,035 1,064

Intangible Assets Impairment 1,178 — 1,178 —

Writedown of Fixed Assets 2,268 — 2,268 —

Other Expense 945 945 1,927 2,058

TOTAL NONINTEREST EXPENSE 13,722 9,071 23,117 18,074

Income Before Income Tax Expense 3,756 902

Income Tax Expense 911 129

NET INCOME $ 2,845 $ 773

EARNINGS PER SHARE

(Loss) Income Before Income Tax (Benefit) Expense ( 369 ) 3,598 3,387 4,500

Income Tax (Benefit) Expense ( 146 ) 695 765 824

NET (LOSS) INCOME $ ( 223 ) $ 2,903 $ 2,622 $ 3,676

(LOSS) EARNINGS PER SHARE

Basic $ ( 0.04 ) $ 0.54 $ 0.48 $ 0.68

6 unchanged sentences

Three Months Ended

(Dollars in thousands)

Net Income $ 2,845 $ 773

Other Comprehensive (Loss) Income:

Change in Unrealized (Loss) Gain on Investment Securities Available-for-Sale

June 30, Six Months Ended

2021 2020 2021 2020

(Dollars in thousands)

Net (Loss) Income $ ( 223 ) $ 2,903 $ 2,622 $ 3,676

Other Comprehensive Income (Loss):

Change in Unrealized Gain (Loss) on Investment Securities Available-for-Sale 922 ( 572 ) ( 1,929 ) 2,946

Income Tax Effect ( 199 ) 120 413 ( 619 )

Reclassification Adjustment for Gain on Sale of Debt Securities Included in Net Income (1)

— ( 489 ) ( 225 ) ( 489 )

Income Tax Effect (2)

Other Comprehensive (Loss) Income, Net of Income Tax Effect ( 2,416 ) 2,779

Other Comprehensive Income (Loss), Net of Income Tax Effect 723 ( 838 ) ( 1,693 ) 1,941

Total Comprehensive Income $ 500 $ 2,065 $ 929 $ 5,617

(1) Reported in Net Gain (Loss) on Securities on the Consolidated Statements of Income.

(2) Reported in Income Tax Expense on the Consolidated Statements of Income.

(1) Reported in Net Gain on Securities on the Consolidated Statements of (Loss) Income.

(2) Reported in Income Tax (Benefit) Expense on the Consolidated Statements of (Loss) Income.

The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

Shares Issued

Capital Surplus

Retained Earnings

Treasury Stock

Accumulated Other

Comprehensive Income (Loss) Total Stockholders' Equity

Three Months Ended June 30, 2021 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Income Total Stockholders' Equity

(Dollars in thousands, except share and per share data)

March 31, 2021 5,680,993 $ 2,367 $ 82,844 $ 52,673 $ ( 5,094 ) $ 986 $ 133,776

Comprehensive Income:

Net Loss — — — ( 223 ) — — ( 223 )

Other Comprehensive Income — — — — — 723 723

Stock-Based Compensation Expense — — 125 — — — 125

Treasury stock purchased, at cost ( 25,297 shares)

— — — — ( 561 ) — ( 561 )

Dividends Paid ($ 0.24 Per Share)

— — — ( 1,304 ) — — ( 1,304 )

June 30, 2021 5,680,993 $ 2,367 $ 82,969 $ 51,146 $ ( 5,655 ) $ 1,709 $ 132,536

Three Months Ended June 30, 2020 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Income Total Stockholders' Equity

(Dollars in thousands, except share and per share data)

March 31, 2020 5,680,993 $ 2,367 $ 83,216 $ 66,431 $ ( 5,914 ) $ 5,425 $ 151,525

Comprehensive Income:

Net Income — — — 2,903 — — 2,903

Other Comprehensive Loss — — — — — ( 838 ) ( 838 )

Stock-Based Compensation Expense — — 111 — — — 111

Exercise of Stock Options — — — — ( 14 ) — ( 14 )

Dividends Paid ($ 0.24 Per Share)

— — — ( 1,295 ) — — ( 1,295 )

June 30, 2020 5,680,993 $ 2,367 $ 83,327 $ 68,039 $ ( 5,928 ) $ 4,587 $ 152,392

The accompanying notes are an integral part of these consolidated financial statements

Six Months Ended June 30, 2021 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Income Total Stockholders' Equity

(Dollars in thousands, except share and per share data)

December 31, 2020 5,680,993 $ 2,367 $ 82,723 $ 51,132 $ ( 5,094 ) $ 3,402 $ 134,530

3 unchanged sentences

Stock-Based Compensation Expense — — 246 — — — 246

Treasury stock purchased, at cost ( 25,297 shares)

— — — — ( 561 ) — ( 561 )

1 unchanged sentence

— — — ( 2,608 ) — — ( 2,608 )

March 31, 2021 5,680,993 $ 2,367 $ 82,844 $ 52,673 $ ( 5,094 ) $ 986 $ 133,776

Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other

Comprehensive Income Total Stockholders' Equity

June 30, 2021 5,680,993 $ 2,367 $ 82,969 $ 51,146 $ ( 5,655 ) $ 1,709 $ 132,536

Six Months Ended June 30, 2020 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Income Total Stockholders' Equity

(Dollars in thousands, except share and per share data)

10 unchanged sentences

— — — ( 2,592 ) — — ( 2,592 )

March 31, 2020 5,680,993 $ 2,367 $ 83,216 $ 66,431 $ ( 5,914 ) $ 5,425 $ 151,525

June 30, 2020 5,680,993 $ 2,367 $ 83,327 $ 68,039 $ ( 5,928 ) $ 4,587 $ 152,392

The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31, 2021 2020

Six Months Ended June 30, 2021 2020

(Dollars in thousands)

4 unchanged sentences

Depreciation and Amortization 1,256 2,158

Provision for Loan Losses — 2,500

(Gain) Loss on Securities ( 447 ) 438

(Recovery) Provision for Loan Losses ( 1,200 ) 2,800

Intangible Asset Impairment 1,178 —

Writedown on Fixed Assets 2,268 —

Lease impairment 227 —

Gain on Securities ( 458 ) ( 79 )

Gain on Purchased Tax Credits ( 35 ) ( 31 )

5 unchanged sentences

Noncash Expense for Stock-Based Compensation 246 256

Decrease in Accrued Interest Receivable 134 23

Net Gain on Disposal of Fixed Assets — ( 17 )

Increase (Decrease) in Taxes Payable 893 ( 1,165 )

Decrease (Increase) in Accrued Interest Receivable 266 ( 1,366 )

Net Loss (Gain) on Disposal of Fixed Assets 3 ( 17 )

Increase in Taxes Payable 247 1,018

Payments on Operating Leases ( 170 ) ( 220 )

10 unchanged sentences

Purchase of Premises and Equipment ( 2,240 ) ( 97 )

Proceeds from Disposal of Premises and Equipment — 25

Proceeds From Sale of Other Real Estate Owned — 42

Decrease in Restricted Equity Securities 200 66

NET CASH PROVIDED BY INVESTING ACTIVITIES 3,733 7,884

Decrease (Increase) in Restricted Equity Securities 243 ( 137 )

NET CASH USED IN INVESTING ACTIVITIES ( 35,300 ) ( 35,278 )

FINANCING ACTIVITIES

Net Increase (Decrease) in Deposits 59,894 ( 11,719 )

Net Increase in Deposits 41,489 75,581

Net Increase in Short-Term Borrowings 8,051 11,778

3 unchanged sentences

Exercise of Stock Options — ( 78 )

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 60,887 ( 13,592 )

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 69,089 ( 2,118 )

NET CASH PROVIDED BY FINANCING ACTIVITIES 44,371 79,781

INCREASE IN CASH AND CASH EQUIVALENTS 11,099 51,186

CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 160,911 80,217

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31, 2021 2021 2020

Six Months Ended June 30, 2021 2021 2020

(Dollars in thousands)

3 unchanged sentences

$ 2,044 $ 3,327

Income Taxes 1,160 —

SUPPLEMENTAL NONCASH DISCLOSURE:

Transfer of Loans to Loans Held for Sale 11,409 —

Transfer of Premises and Equipment to Premises and Equipment Held for Sale and Other Assets 1,075 —

Transfer of Deposits to Deposits Held for Sale 102,557 —

Other Real Estate Acquired in Settlement of Loans — 76

Securities Sold Not Settled — 2,450

Right of Use Asset Recognized — 47

6 unchanged sentences

(“CB Financial”) and its wholly owned subsidiary, Community Bank (the “Bank”), and the Bank’s wholly-owned subsidiary, Exchange Underwriters, Inc.

(“Exchange Underwriters” or “EU”).

(“Exchange Underwriters”).

CB Financial, the Bank and Exchange Underwriters are collectively referred to as the “Company”.

All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading in any material respect.

In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and income and expenses during the reporting period.

In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and income and expenses for the reporting period.

Actual results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, evaluation of securities for other-than-temporary impairment including related cash flow projections, goodwill and intangible assets impairment, and the valuation of deferred tax assets.

Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, other-than-temporary impairment evaluations of securities, goodwill and intangible assets impairment, and the valuation of deferred tax assets.

In the opinion of management, the accompanying unaudited interim financial statements include all adjustments considered necessary for a fair presentation of the Company’s financial position and results of operations at the dates and for the periods presented.

3 unchanged sentences

The Company evaluated subsequent events through the date the consolidated financial statements were filed with the SEC and incorporated into the consolidated financial statements the effect of all material known events determined by Accounting Standards Codification ("ASC") 855, Subsequent Events , to be recognizable events.

Branch Optimization and Operational Efficiency Update

As previously disclosed by the Company on February 23, 2021, the Company announced the implementation of strategic initiatives to improve the Bank’s financial performance and to position the Bank for continued profitable growth.

The Bank intends to optimize its current branch network through the consolidation of six branches and the possible divestiture of others, while expanding technology and infrastructure investments in its remaining locations.

The decision was the result of a comprehensive internal study that measured branch performance by comparing financial and non-financial indicators to growth opportunities, while evolving changes in consumer preferences, largely driven by the global pandemic, led to an acceleration of branch optimization efforts.

The branch optimization, which is expected to be completed in 2021, will result in the Company incurring restructuring related expenses predominantly from branch consolidations, lease termination and severance costs.

The Bank also completed a comprehensive review of its branch network and operating environment to identify solutions to improve operating performance.

This review prioritized profitability, efficiency, infrastructure and client experience improvements, automation in operations, and digital marketing and technology investments.

Nature of Operations

1 unchanged sentence

The Company provides banking services through its subsidiary, Community Bank, a Pennsylvania-chartered commercial bank.

The Bank operates 15 offices in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania, six offices in Brooke, Marshall, Ohio, Upshur and Wetzel Counties in West Virginia, and one office in Belmont County in Ohio.

The Bank operates 11 branches in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania, and five branches in Marshall, Ohio, Upshur and Wetzel Counties in West Virginia.

The Bank is a community-oriented institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area.

3 unchanged sentences

Such reclassifications did not affect net income or stockholders’ equity.

Assets and Liabilities Held for Sale

Assets and liabilities (disposal groups) are classified as held for sale when their carrying amounts will be recovered principally through sale when all of the following criteria are met:

• management, having the authority to approve the action, commits to a plan to sell the disposal group;

• the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups;

• an active program to locate a buyer and other actions required to complete the plan to sell the disposal group have been initiated;

• the sale of the disposal group is probable, and transfer of the disposal group is expected to qualify as a completed sale within one year, except if events or circumstances beyond the Company’s control extend the period of time required to sell the disposal group beyond one year;

• the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value;

• actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Assets and liabilities held for sale are measured at the lower of carrying amount and fair value, less estimated costs to sell, and are presented separately on the Consolidated Statements of Financial Condition.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Gains are not recognized on the sale of a disposal group until the date of sale.

The Company assesses the fair value of a disposal group, less any estimated costs to sell, each reporting period it remains classified as held for sale and reports any subsequent losses as an adjustment to the carrying value of the disposal group.

Assets classified as held for sale are no longer depreciated or amortized.

Loans held for sale may consist of residential real estate loans originated and intended for sale in the secondary market.

These loans are generally sold with loan servicing rights retained.

Net unrealized losses, if any, are recognized through a valuation allowance charged to income.

Gains and losses on residential real estate loans held for sale are included in noninterest income.

Impairment of Long-Lived Assets

The Company routinely performs assessments of the recoverability of long-lived assets when events or changes in circumstances indicate that their carrying values may not be recoverable and are in excess of their fair value less estimated costs to sell.

If estimated recoverable amounts are lower than carrying values, assets are considered impaired and reduced to their recoverable amounts with the recognized impairment charges recorded in noninterest expense in the Consolidated Statements of (Loss) Income.

Long-lived assets are tested for impairment individually or as part of an asset group.

An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

The Company follows ASC 360, Property, Plant and Equipment, which requires three steps to identify, recognize and measure the impairment of a long-lived asset (asset group) to be held and used:

Step 1 – Consider whether Indicators of Impairment are Present.

The following are examples of such events or changes in circumstances.

• A significant decrease in the market price of a long-lived asset (asset group).

• A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition.

• A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator.

• An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group).

• A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group).

• A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

The term more likely than not refers to a level of likelihood that is more than 50 percent.

Step 2—Test for Recoverability

If indicators of impairment are present, the Company performs a recoverability test comparing the sum of the estimated undiscounted cash flows attributable to the long-lived asset or asset group in question to the carrying amount of the long-lived asset or asset group.

Step 3—Measurement of an Impairment Loss

If the undiscounted cash flows used in the recoverability test are less than the carrying amount of the long-lived asset (asset group), the Company estimates the fair value of the long-lived asset or asset group and recognizes an impairment loss when the carrying amount of the long-lived asset or asset group exceeds the estimated fair value.

An impairment loss is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts of those assets, except that the loss allocated to an individual long-lived asset of the group must not reduce the carrying amount of

that asset below its fair value whenever the fair value is determinable without undue cost and effort.

ASC 360 prohibits the subsequent reversal of an impairment loss for an asset held and used.

Recent Accounting Standards

37 unchanged sentences

The Company is evaluating the impact of this ASU and expects to recognize a one-time adjustment to the allowance for loan losses upon adoption, but we cannot yet determine the magnitude of the one-time adjustment or the overall impact of the new guidance on the Company’s consolidated financial condition or results of operation.

Earnings Per Share

There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share;

therefore, net income as presented on the Consolidated Statements of Income is used as the numerator.

Impairment of Long-Lived Assets and Assets and Liabilities of Branches Held for Sale

Branch Optimization and Operational Efficiency Initiatives

As previously disclosed by the Company on February 23, 2021, May 27, 2021 and June 10, 2021, the Company announced the implementation of branch optimization and operational efficiency strategic initiatives to improve the Bank’s financial performance and operations in order to position the Bank for continued profitable growth.

The Bank intends to optimize its

current branch network while expanding technology and infrastructure investments in its remaining locations.

The Bank also completed a comprehensive review of its branch network and operating environment to identify solutions to improve operating performance.

This review prioritized profitability, efficiency, infrastructure and client experience improvements, automation in operations, and digital marketing and technology investments.

The Bank continues to make progress related to these initiatives through the consolidation of six branches that was completed on June 30, 2021, reducing the Bank's branch network to 16 branches.

The Bank is also in the process of implementing operational efficiencies related to individualized processes within its branch network and operating environment.

In addition, on June 10, 2021, CB Financial, Community Bank, and Citizens Bank of West Virginia, Inc.

(“Citizens Bank”) executed a Purchase and Assumption Agreement (the “Agreement”) pursuant to which Citizens Bank has agreed to purchase certain loans and other assets, and assume certain deposits and other liabilities, of the branch offices of Community Bank located in Buckhannon, West Virginia, and in New Martinsville, West Virginia.

The Agreement provides for a 5.0 % premium to be paid on assumed deposits, which will be recognized as income upon the expected close of the transaction in the fourth quarter of 2021, subject to regulatory approval and other closing conditions.

As a result of the events and changes in circumstances associated with the branch optimization initiatives whereby six branches were consolidated and two others are to be divested, the Company performed assessments of the recoverability of long-lived assets to determine whether their carrying values may not be recoverable.

Utilizing guidance in ASC 360, the Company performed the three step process to identify, recognize and measure the impairment of the long-lived assets.

• For the six locations that were consolidated:

◦ Three locations were written down to the fair value of the land based on the appraised value due to plans to raze the buildings.

◦ Two locations are being marketed for sale and were written down to fair value based on appraised value.

◦ One location is leased.

Refer to Note 11 for further discussion of the impairment of the right of use asset associated with the operating lease.

• For the two branches to be divested, fair value of the premises and equipment was determined based on the contractual terms of the Agreement, which note the premises and equipment will be purchased at the Company's net book value, net of a $ 338,000 contractual discount at the acquisition date.

In total, the Company recognized $ 2.3 million in charges on the premises and equipment for the three and six months ended June 30, 2021 as Writedown on Fixed Assets in the Consolidated Statements of (Loss) Income.

The branch optimization and operational efficiency initiatives resulted in $ 4.7 million and $ 5.1 million of restructuring-related and other expenses for the three and six months ended June 30, 2021, respectively.

The expenses include the aforementioned $ 2.3 million writedown on fixed assets, as well as a $ 1.2 million impairment of intangible assets associated with the branch sales (refer to Note 14 for further information) and $ 1.3 million and $ 1.6 million of expenses related to contracted services, employee severance costs, branch lease impairment (refer to Note 11 for further information), professional fees, data processing fees, legal and other expenses for the three and six months ended June 30, 2021, respectively.

Assets and Liabilities of Branches Held for Sale

At June 30, 2021, the Company reclassified the deposits to be assumed to deposits held for sale, loans to be purchased to loans held for sale and premises and equipment to be purchased to premises and equipment held for sale on the Consolidated Statements of Financial Condition.

The assets and liabilities classified as held for sale of the disposal group related to the branch sales are as follows

(Dollars in thousands)

Loans Held for Sale

Residential $ 2,368

Commercial 2,513

Commercial and Industrial 438

Total Loans Held for Sale $ 6,075

Premises and Equipment Held for Sale 795

Deposits Held for Sale

Non-Interest Bearing Demand Deposits $ 16,125

Interest Bearing Demand Deposits 29,487

Money Market Accounts 17,219

Savings Accounts 21,389

Time Deposits 18,337

Total Deposits Held for Sale $ 102,557

(Loss) Earnings Per Share

There are no convertible securities which would affect the numerator in calculating basic and diluted (loss) earnings per share;

therefore, net (loss) income as presented on the Consolidated Statements of (Loss) Income is used as the numerator.

The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation.

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(Dollars in thousands, except share and per share data)

Net Income $ 2,845 $ 773

Net (Loss) Income $ ( 223 ) $ 2,903 $ 2,622 $ 3,676

Weighted-Average Basic Common Shares Outstanding

1 unchanged sentence

Dilutive Effect of Common Stock Equivalents (Stock Options and Restricted Stock)

— 58 5,103 11,314

Weighted-Average Diluted Common Shares and Common Stock Equivalents Outstanding

5,432,234 5,393,770 5,438,401 5,423,770

Earnings Per Share:

(Loss) Earnings Per Share:

$ ( 0.04 ) $ 0.54 $ 0.48 $ 0.68

( 0.04 ) 0.54 0.48 0.68

The dilutive effect on weighted average diluted common shares outstanding is the result of outstanding stock options and nonvested restricted stock.

The following table presents for the periods indicated (a) options to purchase shares of common stock that were outstanding but not included in the computation of earnings per share because the options’ exercise price was greater than the average market price of the common shares for the period, and (b) shares of restricted stock awards that were not included in the computation of diluted earnings per share because the hypothetical repurchase of shares under the treasury stock method exceeded the weighted average nonvested restricted awards, therefore the effects would be anti-dilutive.

included in the computation of diluted earnings per share because the hypothetical repurchase of shares under the treasury stock method exceeded the weighted average nonvested restricted awards, therefore the effects would be anti-dilutive.

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Stock Options 216,662 205,271 201,662 73,731

4 unchanged sentences

The following table presents the amortized cost and fair value of securities available-for-sale at the dates indicated:

March 31, 2021

June 30, 2021

(Dollars in thousands)

24 unchanged sentences

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at the dates indicated:

March 31, 2021

June 30, 2021

Less than 12 months

13 unchanged sentences

7 $ 32,399 $ ( 595 ) — $ — $ — 7 $ 32,399 $ ( 595 )

For debt securities, the Company does not believe that any individual unrealized loss as of March 31, 2021 or December 31, 2020, represents an other-than-temporary impairment.

For debt securities, the Company does not believe that any individual unrealized loss as of June 30, 2021 or December 31, 2020, represents an other-than-temporary impairment.

The Company performs a review of the entire securities portfolio on a quarterly basis to identify securities that may indicate an other-than-temporary impairment.

The Company’s management considers the length of time and the extent to which the fair value has been less than cost, and the financial condition of the issuer.

The securities that are temporarily impaired at March 31, 2021 and December 31, 2020 relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

The securities that are temporarily impaired at June 30, 2021 and December 31, 2020 relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

The Company does not intend to sell, and it is not more likely than not that it will be required to sell any of the securities in an unrealized loss position before recovery of its amortized cost or maturity of the security.

Securities available-for-sale with a fair value of $ 129.1 million and $ 119.7 million at March 31, 2021 and December 31, 2020, respectively, are pledged to secure public deposits, short-term borrowings and for other purposes as required or permitted by law.

Securities available-for-sale with a fair value of $ 166.1 million and $ 119.7 million at June 30, 2021 and December 31, 2020, respectively, are pledged to secure public deposits, short-term borrowings and for other purposes as required or permitted by law.

The following table presents the scheduled maturities of debt securities as of the date indicated:

March 31, 2021

June 30, 2021

(Dollars in thousands)

Due in One Year or Less

$ 1,736 $ 1,758

Due after One Year through Five Years

5 unchanged sentences

The following table presents the gross realized gain and loss on sales of debt securities, as well as gain and loss on equity securities from both sales and market adjustments for the periods indicated.

All gains and losses presented in the table below are reported in net gain (loss) on securities on the Consolidated Statements of Income.

All gains and losses presented in the table below are reported in net gain on securities on the Consolidated Statements of (Loss) Income.

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(Dollars in thousands)

7 unchanged sentences

Net Gain (Loss) on Equity Securities $ 11 $ 28 $ 233 $ ( 410 )

Net Gain (Loss) on Securities $ 447 $ ( 438 )

Net Gain on Securities $ 11 $ 517 $ 458 $ 79

Loans and Allowance for Loan Losses

19 unchanged sentences

The following table presents the classifications of loans as of the dates indicated.

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(Dollars in thousands)

10 unchanged sentences

$ 995,902 $ 1,031,982

The Small Business Administration reopened the Payroll Protection Program ("PPP") the week of January 11, 2021 and began accepting applications for both First Draw and Second Draw PPP Loans.

As of March 31, 2021, as part of this round of PPP, the Bank funded 156 PPP loans totaling $ 25.0 million with net deferred origination fees of $ 984,000 .

Combined with $ 19.7 million of loan forgiveness processed in the first quarter of 2021, total PPP loans increased $ 5.3 million to $ 60.4 million at March 31, 2021 compared to $ 55.1 million at December 31, 2020.

At March 31, 2021, the largest sectors of PPP loans were $ 15.2 million for construction and specialty-trade contractors, $ 10.1 million in loans for health care and social assistance, $ 8.2 million for professional and technical services, $ 3.5 million for retail trade, $ 5.0 million for restaurant and food services, $ 4.9 million for manufacturing, and $ 4.5 million for wholesale trade.

Net unamortized PPP loan origination fees as of March 31, 2021 and December 31, 2020 were $ 1.5 million and $ 1.1 million, respectively.

$ 535,000 of net PPP loan origination fees were earned for the three months ended March 31, 2021.

The Small Business Administration reopened the Payroll Protection Program ("PPP") the week of January 11, 2021 accepting applications for both First Draw and Second Draw PPP Loans.

As of June 30, 2021, as part of this round of PPP, the Bank funded 217 PPP loans totaling $ 34.6 million with net deferred origination fees of $ 1.3 million.

PPP loans decreased $ 5.6 million to $ 49.5 million at June 30, 2021 compared to $ 55.1 million at December 31, 2020.

At June 30, 2021, the largest sectors of PPP loans were $ 8.6 million for construction and specialty-trade contractors, $ 5.8 million in loans for health care and social assistance, $ 4.5 million for professional and technical services, $ 3.4 million for manufacturing, $ 3.1 million for restaurant and food services, and $ 2.8 million for wholesale trade.

Net unamortized PPP loan origination fees as of June 30, 2021 and December 31, 2020 were $ 1.4 million and $ 1.1 million, respectively.

Net PPP loan origination fees earned were $ 489,000 and $ 1.0 million for the three and six months ended June 30, 2021, respectively.

All PPP loans are classified as commercial and industrial loans held for investment.

No allowance for loan loss was allocated to the PPP loan portfolio due to the Bank complying with the lender obligations that ensure SBA guarantee.

Total unamortized net deferred loan fees were $ 2.5 million and $ 2.0 million at March 31, 2021 and December 31, 2020, respectively.

Total unamortized net deferred loan fees were $ 2.4 million and $ 2.0 million at June 30, 2021 and December 31, 2020, respectively.

The following table presents classification of loans held for sale as of June 30, 2021.

Loans held for sale includes $ 6.1 million related to the Agreement executed with Citizens Bank and $ 5.3 million of residential real estate loans originated and intended for sale in the secondary market.

There were no loans held for sale at December 31, 2020.

Additionally, there were no loans held for sale that were delinquent, nonaccrual or considered criticized loans.

Residential $ 7,702

Commercial 2,513

Construction —

Commercial and Industrial 438

Total Loans Held for Sale $ 11,409

The Company uses an eight-point internal risk rating system to monitor the credit quality of the overall loan portfolio.

6 unchanged sentences

The following table presents loans summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of the dates indicated.

At March 31, 2021 and December 31, 2020, there were no loans in the criticized category of Loss within the internal risk rating system.

March 31, 2021

At June 30, 2021 and December 31, 2020, there were no loans in the criticized category of Loss within the internal risk rating system.

June 30, 2021

(Dollars in Thousands)

18 unchanged sentences

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of the dates indicated.

March 31, 2021

June 30, 2021

(Dollars in Thousands)

17 unchanged sentences

$ 1,029,036 $ 3,704 $ 1,116 $ 8 $ 4,828 $ 10,889 $ 1,044,753

Total unrecorded interest income related to nonaccrual loans was $ 61,000 and $ 11,000 for the three months ended March 31, 2021 and 2020, respectively.

The increase in nonaccrual loans at June 30, 2021 compared to December 31, 2020 is primarily related to a $ 2.0 million construction loan secured by a hotel.

Additional interest income that would have been recorded on nonaccrual loans if the loans were current was $ 135,000 and $ 196,000 for the three and six months ended June 30, 2021, respectively, and $ 37,000 and $ 48,000 for the three and six months ended June 30, 2020, respectively.

The following table sets forth the amounts and categories of nonperforming assets at the dates indicated.

6 unchanged sentences

$ 1,966 $ 1,841

Construction 1,958 —

Commercial and Industrial

17 unchanged sentences

Nonperforming Assets to Total Assets

The recorded investment of residential real estate loans for which formal foreclosure proceedings were in process according to applicable requirements of the local jurisdiction was $ 754,000 and $ 806,000 at March 31, 2021 and December 31, 2020, respectively.

The recorded investment of residential real estate loans for which formal foreclosure proceedings were in process according to applicable requirements of the local jurisdiction was $ 1.5 million and $ 806,000 at June 30, 2021 and December 31, 2020, respectively.

TDRs typically are the result of loss mitigation activities whereby concessions are granted to minimize loss and avoid foreclosure or repossession of collateral.

2 unchanged sentences

Specifically, the CARES Act provides that the Bank may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and suspend any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes.

Consolidated Appropriations Act, 2021) or the date that is 60 days after the termination date of the national emergency related to the COVID-19 outbreak qualify for this exception, including a forbearance arrangement, interest rate modification, repayment plan or any other similar arrangement that defers or delays the payment of principal or interest.

Any modification involving a loan that was not more than 30 days past due as of December 31, 2019 and that occurs beginning on March 1, 2020 and ends on the earlier of January 1, 2022 (as extended by the Consolidated Appropriations Act, 2021) or the date that is 60 days after the termination date of the national emergency related to

the COVID-19 outbreak qualify for this exception, including a forbearance arrangement, interest rate modification, repayment plan or any other similar arrangement that defers or delays the payment of principal or interest.

Bank regulatory agencies released an interagency statement that offers practical expedients for modifications that occur in response to the COVID-19 pandemic, but it differs with the CARES Act in certain areas.

8 unchanged sentences

The following table provides details of loans in forbearance as of the dates indicated.

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Loans Amount % of Portfolio Number

7 unchanged sentences

Total Loans in Forbearance 9 $ 7,765 0.8 % 31 $ 24,100 2.3 %

Loans in deferral at March 31, 2021 include two commercial real estate loans totaling $ 4.6 million and one construction loan totaling $ 2.0 million that are all secured by hotels, one commercial real estate loan totaling $ 5.5 million secured by office space and a business relationship that rents equipment, supplies and other materials for events comprised of three commercial real estate loans totaling $ 3.3 million, and five commercial and industrial loans totaling $ 1.2 million.

All loans will have exited their deferral periods by July 2021.

Loans in deferral at June 30, 2021 include one commercial real estate loans totaling $ 3.3 million that is secured by a hotel, and a business relationship that rents equipment, supplies and other materials for events comprised of three commercial real estate loans totaling $ 3.3 million, and five commercial and industrial loans totaling $ 1.2 million.

These loans ended their forbearance period in July and begin making regularly scheduled payments.

The concessions granted for the TDRs in the portfolio primarily consist of, but are not limited to, modification of payment or other terms, temporary rate modification and extension of maturity date.

Loans classified as TDRs consisted of 16 loans totaling $ 4.1 million at March 31, 2021 and 17 loans totaling $ 4.2 million at December 31, 2020, respectively.

During the three months ended March 31, 2021, there were no loans that were modified that were considered a TDR and one residential real estate loan modified in a TDR totaling $ 3,000 that paid off.

During the three months ended March 31, 2020, there were no loans that were modified that were considered a TDR and no loans modified in a TDR that paid off.

No TDRs subsequently defaulted during the three months ended March 31, 2021 and 2020, respectively.

Loans classified as TDRs consisted of 14 loans totaling $ 3.3 million at June 30, 2021 and 17 loans totaling $ 4.2 million at December 31, 2020, respectively.

The following table presents information at the time of modification related to loans modified in a TDR during the periods indicated.

During the three and six months ended June 30, 2021, there were no loans that were modified that were considered a TDR.

Three Months and Six Months Ended June 30, 2020

Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Related Allowance

(Dollars in thousands)

Residential 1 $ 234 $ 234 $ —

Total 1 $ 234 234 $ —

During the three months ended June 30, 2021, one commercial real estate loan totaling $ 698,000 and one commercial and industrial loan totaling $ 8,000 that were previously modified in a TDR paid off in full.

During the six months ended June 30, 2021, one residential real estate loan totaling $ 3,000 , one commercial real estate loan totaling $ 698,000 and one commercial and industrial loan totaling $ 8,000 previously modified in a TDR paid off in full.

During the three and six month ended June 30, 2020, one residential real estate loan totaling $ 60,000 previously modified in a TDR paid off in full.

No TDRs subsequently defaulted during the three and six months ended June 30, 2021 and 2020, respectively.

The following table presents a summary of the loans considered to be impaired as of the dates indicated.

March 31, 2021

June 30, 2021

(Dollars in thousands)

48 unchanged sentences

$ 44,141 $ 649 $ 45,377 $ 49,775 $ 1,841

The recorded investment of loans evaluated for impairment decreased $ 18.3 million at June 30, 2021 compared to December 31, 2020 and was primarily related to commercial real estate loans.

This is the result of no longer evaluating separately for impairment certain commercial real estate loans secured by hotels that have manageable loan-to-value ratios and have exhibited an ability to cash flow during the COVID-19 pandemic, with the expectation that hotel operations strengthen further as occupancy rates increase due to the economy reopening and resumption of travel.

The following tables present the activity in the allowance for loan losses summarized by primary segments and segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for potential impairment at the dates and for the periods indicated.

(Dollars in thousands)

December 31, 2020 $ 2,249 $ 6,010 $ 889 $ 1,423 $ 1,283 $ — $ 917 $ 12,771

March 31, 2021 $ 1,975 $ 5,917 $ 939 $ 1,543 $ 1,103 $ — $ 1,248 $ 12,725

— — — — ( 25 ) — — ( 25 )

4 — — 10 30 — — 44

Provision (Recovery) ( 391 ) ( 335 ) 197 ( 401 ) ( 167 ) — ( 103 ) ( 1,200 )

June 30, 2021 $ 1,588 $ 5,582 $ 1,136 $ 1,152 $ 941 $ — $ 1,145 $ 11,544

(Dollars in thousands)

December 31, 2020 $ 2,249 $ 6,010 $ 889 $ 1,423 $ 1,283 $ — $ 917 $ 12,771

— — — — ( 120 ) — — ( 120 )

March 31, 2021 $ 1,975 $ 5,917 $ 939 $ 1,543 $ 1,103 $ — $ 1,248 $ 12,725

March 31, 2021

13 — — 22 58 — — 93

Provision (Recovery) ( 674 ) ( 428 ) 247 ( 293 ) ( 280 ) — 228 ( 1,200 )

June 30, 2021 $ 1,588 $ 5,582 $ 1,136 $ 1,152 $ 941 $ — $ 1,145 $ 11,544

June 30, 2021

(Dollars in thousands)

10 unchanged sentences

(Dollars in thousands)

December 31, 2019 $ 2,023 $ 3,210 $ 285 $ 2,412 $ 1,417 $ — $ 520 $ 9,867

March 31, 2020 $ 2,685 $ 4,875 $ 664 $ 1,592 $ 1,879 $ — $ 627 $ 12,322

— — — — ( 37 ) — — ( 37 )

2 13 — 6 42 — — 63

Provision (Recovery) 1 272 156 ( 32 ) ( 170 ) — 73 300

June 30, 2020 $ 2,688 $ 5,160 $ 820 $ 1,566 $ 1,714 $ — $ 700 $ 12,648

(Dollars in thousands)

December 31, 2019 $ 2,023 $ 3,210 $ 285 $ 2,412 $ 1,417 $ — $ 520 $ 9,867

( 25 ) — — — ( 136 ) — — ( 161 )

March 31, 2020 $ 2,685 $ 4,875 $ 664 $ 1,592 $ 1,879 $ — $ 627 $ 12,322

March 31, 2020

4 27 — 15 96 — — 142

Provision (Recovery) 686 1,923 535 ( 861 ) 337 — 180 2,800

June 30, 2020 $ 2,688 $ 5,160 $ 820 $ 1,566 $ 1,714 $ — $ 700 $ 12,648

June 30, 2020

(Dollars in thousands)

3 unchanged sentences

$ 2,688 $ 4,761 $ 820 $ 1,366 $ 1,714 $ — $ 700 $ 12,049

The allowance for loan losses was $ 11.5 million at June 30, 2021 compared to $ 12.8 million at December 31, 2020.

There was a net recovery of $ 1.2 million of provision for loan losses for the three and six months ended June 30, 2021.

A $ 31.7 million decrease in net reservable loans in the current quarter, which excludes PPP loans and includes the reclassification of $ 11.4 million of loans to held for sale that do not require a reserve, as well as a decrease in specifically impaired loans and improving economic and industry conditions contributed to the net recovery in the current period.

The following table presents the major classifications of loans summarized by individually evaluated for impairment and collectively evaluated for potential impairment as of the dates indicated.

At March 31, 2021 and December 31, 2020, commercial and industrial loans include $ 60.4 million and $ 55.1 million, respectively, of PPP loans collectively evaluated for potential

At June 30, 2021 and December 31, 2020, commercial and industrial loans include $ 49.5 million and $ 55.1 million, respectively, of PPP loans collectively evaluated for potential impairment.

No allowance for loan loss was allocated to the PPP loan portfolio due to the Bank complying with the lender obligations that ensure SBA guarantee.

March 31, 2021

June 30, 2021

(Dollars in thousands)

16 unchanged sentences

Accretable Yield

March 31, 2021 $ 1,056

June 30, 2021 $ 903

Time Deposits

The following table shows the maturities of time deposits for the next five years and beyond at the date indicated.

June 30, 2021 Time Deposits Time Deposits Held for Sale Time Deposits,

(Dollars in thousands)

One Year or Less

$ 70,931 $ 7,849 $ 63,082

Over One Through Two Years

56,888 4,283 52,605

Over Two Through Three Years

20,342 2,545 17,797

Over Three Through Four Years

10,024 2,121 7,903

Over Four Through Five Years

10,319 1,340 8,979

Over Five Years

The balance in time deposits that meet or exceed the FDIC insurance limit of $250,000 totaled $ 53.9 million and $ 59.2 million as of March 31, 2021 and December 31, 2020, respectively.

The aggregate amount of demand deposits that are overdrawn and have been reclassified as loans was $ 181,000 and $ 231,000 as of March 31, 2021 and December 31, 2020, respectively.

4,551 199 4,352

$ 173,055 $ 18,337 $ 154,718

The balance in time deposits, including time deposits held for sale, that meet or exceed the FDIC insurance limit of $250,000 totaled $ 53.6 million and $ 59.2 million as of June 30, 2021 and December 31, 2020, respectively.

The aggregate amount of demand deposits, including demand deposits held for sale, that are overdrawn and have been reclassified as loans was $ 116,000 and $ 231,000 as of June 30, 2021 and December 31, 2020, respectively.

Short-Term Borrowings

Borrowings with original maturities of one year or less are classified as short-term and may consist of borrowings with the Federal Home Loan Bank ("FHLB"), securities sold under agreements to repurchase or borrowings on revolving lines of credit with the Federal Reserve Bank or other correspondent banks, Securities sold under repurchase agreements are comprised of customer repurchase agreements, which are overnight sweep accounts with next-day maturities utilized by commercial customers to earn interest on their funds.

Securities sold under repurchase agreements are comprised of customer repurchase agreements, which are overnight sweep accounts with next-day maturities utilized by commercial customers to earn interest on their funds.

Securities are pledged as collateral under these agreements in an amount at least equal to the outstanding balance and the collateral pledging requirements are monitored on a daily basis.

$ 10.1 million of securities sold under agreements to repurchase are reported as deposits held for sale at June 30, 2021 because the associated deposits will be sold as part of the Agreement with Citizens Bank.

See Note 2 for further information.

The following table sets forth the components of short-term borrowings as of the dates indicated.

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Amount Weighted

11 unchanged sentences

The following table sets forth the scheduled maturities of other borrowed funds at the dates indicated.

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(Dollars in thousands)

6 unchanged sentences

$ 6,000 2.32 % $ 8,000 2.27 %

As of March 31, 2021, the Company maintained a credit arrangement with a maximum borrowing limit of approximately $ 433.0 million with the FHLB and available borrowing capacity of $ 332.7 million.

This arrangement is subject to annual renewal, incurs no service charge, and is secured by a blanket security agreement on $ 580.9 million of residential and commercial mortgage loans and the Company’s investment in FHLB stock.

Under this arrangement the Company had available a variable rate Line of Credit in the amount of $ 150.0 million as of March 31, 2021, of which there was no outstanding balance.

As of June 30, 2021, the Bank maintained a credit arrangement with a maximum borrowing limit of approximately $ 430.7 million with the FHLB and available borrowing capacity of $ 317.8 million.

This arrangement is subject to annual renewal, incurs no service charge, and is secured by a blanket security agreement on $ 577.9 million of residential and commercial mortgage loans and the Bank’s investment in FHLB stock.

Under this arrangement the Bank had available a variable rate Line of Credit in the amount of $ 150.0 million as of June 30, 2021, of which there was no outstanding balance.

As an alternative to pledging securities, the FHLB periodically provides standby letters of credit on behalf of the Bank to secure certain public deposits in excess of the level insured by the FDIC.

If the FHLB is required to make payment for a beneficiary’s draw, the payment amount is converted into a collateralized advance to the Bank.

Standby letters of credit issued on our behalf by the FHLB to secure public deposits were $ 99.6 million and $ 90.3 million as of March 31, 2021 and December 31, 2020, respectively.

At March 31, 2021, the Company maintained a Borrower-In-Custody of Collateral line of credit agreement with the Federal Reserve Bank (“FRB”) for $ 84.4 million that requires monthly certification of collateral, is subject to annual renewal, incurs no service charge and is secured by $ 131.7 million of commercial and industrial and consumer indirect auto loans.

In addition, the Company also maintains multiple line of credit arrangements with various unaffiliated banks totaling $ 50.0 million of which no draws had been taken.

Standby letters of credit issued on our behalf by the FHLB to secure public deposits were $ 104.5 million and $ 90.3 million as of June 30, 2021 and December 31, 2020, respectively.

At June 30, 2021, the Bank maintained a Borrower-In-Custody of Collateral line of credit agreement with the Federal Reserve Bank (“FRB”) for $ 79.8 million that requires monthly certification of collateral, is subject to annual renewal, incurs no service charge and is secured by $ 120.3 million of commercial and industrial and consumer indirect auto loans.

In addition, the Bank also maintains multiple line of credit arrangements with various unaffiliated banks totaling $ 50.0 million of which no draws had been taken.

At June 30, 2021 and December 31, 2020, CB Financial did not maintain any credit facilities.

Fair Value Disclosure

15 unchanged sentences

The standard inputs that are normally used include benchmark yields of like securities, reportable trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.

There were no transfers into or out of Level 3 during the three months ended March 31, 2021 or year ended December 31, 2020.

There were no transfers into or out of Level 3 during the six months ended June 30, 2021 or year ended December 31, 2020.

2021 December 31

15 unchanged sentences

The table also presents the significant unobservable inputs used in the fair value measurements.

Financial Asset Fair Value Hierarchy March 31,

Financial Asset Fair Value Hierarchy June 30,

2021 Valuation

24 unchanged sentences

Fair value is measured based on the value of the collateral securing these loans and is classified as Level 3 in the fair value hierarchy.

At March 31, 2021 and December 31, 2020, the fair value of impaired loans consists of the loan balances of $ 3.1 million and $ 3.6 million, respectively, less their specific valuation allowances of $ 771,000 and $ 649,000 , respectively.

At June 30, 2021 and December 31, 2020, the fair value of impaired loans consists of the loan balances of $ 2.5 million and $ 3.6 million, respectively, less their specific valuation allowances of $ 323,000 and $ 649,000 , respectively.

The fair value of mortgage servicing rights ("MSRs") is determined by calculating the present value of estimated future net servicing cash flows, considering expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions.

2 unchanged sentences

Since the valuation model includes significant unobservable inputs as listed above, MSRs are classified as Level 3.

MSRs are reported in Other Assets in the Consolidated Statements of Financial Condition and are amortized into mortgage servicing income in Other Income in the Consolidated Statements of Income.

MSRs are reported in Other Assets in the Consolidated Statements of Financial Condition and are amortized into mortgage servicing income in Other Income in the Consolidated Statements of (Loss) Income.

OREO properties are evaluated at the time of acquisition and recorded at fair value, less estimated selling costs.

8 unchanged sentences

The following table presents the estimated fair values of the Company’s financial instruments at the dates indicated.

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(Dollars in thousands)

7 unchanged sentences

208,472 208,472 145,400 145,400

Loans Held for Sale Level 2 11,409 11,409 — —

1,007,311 1,029,046 1,031,982 1,073,633

Property and Equipment Held for Sale Level 2 795 795 — —

Restricted Stock

4 unchanged sentences

Financial Liabilities:

Deposits Held for Sale Level 2 102,557 107,685 — —

1,173,553 1,175,088 1,224,569 1,231,606

47 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(Dollars in thousands)

9 unchanged sentences

Weighted Average Discount Rate 2.44 % 2.39 %

(Dollars in throusands)

(Dollars in thousands)

Maturity Analysis:

8 unchanged sentences

Lease Liabilities $ 1,039

Impairment of ROU Assets

ROU assets from operating leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment and are reviewed for impairment when indicators of impairment are present.

ASC 360 requires three steps to identify, recognize and measure impairment.

If indicators of impairment are present (Step 1), the Company performs a recoverability test (Step 2) comparing the sum of the estimated undiscounted cash flows attributable to the ROU asset in question to the carrying amount.

If the undiscounted cash flows used in the recoverability test are less than the carrying amount, the Company estimates the fair value of the ROU asset and recognizes an impairment loss when the carrying amount exceeds the estimated fair value (Step 3).

At June 30, 2021, the Company consolidated six branches as part of its branch optimization initiative.

One of the branches was leased and the Company performed the three-step evaluation as outlined above to determine whether the operating lease was impaired.

As part of the recoverability test, the Company elected to exclude operating lease liabilities from the carrying amount of the asset group.

The undiscounted future cash flows used in the recoverability test were based on assumptions made by the Company rather than market participant assumptions.

Since an election was made to exclude operating lease liabilities from the asset or asset group, all future cash lease payments for the lease were also excluded.

In addition, the Company elected to exclude operating lease liabilities from the estimated fair value, consistent with the recoverability test When determining the fair value of the ROU asset, the Company estimated what market participants would pay to lease the asset.

The ROU asset was valued assuming its highest and best use in its current form.

Based on the analysis, the Company concluded that the ROU asset for this branch was fully impaired as of June 30, 2021, resulting in a remaining ROU carrying value of zero and the recognition of a $ 227,000 impairment for the three and six months ended June 30, 2021.

The impairment was recognized in Occupancy expense on the Consolidated Statements of (Loss) Income.

Other Noninterest Expense

The details of other noninterest expense for the Company’s Consolidated Statements of Income for the periods indicated are as follows:

The details of other noninterest expense for the Company’s Consolidated Statements of (Loss) Income for the periods indicated are as follows:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(Dollars in thousands)

7 unchanged sentences

Meals and Entertainment 26 34 60 74

Travel 28 20 50 74

Training 7 7 24 14

4 unchanged sentences

Segment and Related Information

At March 31, 2021, the Company’s business activities were comprised of two operating segments, which are community banking and insurance brokerage services.

At June 30, 2021, the Company’s business activities were comprised of two operating segments, which are community banking and insurance brokerage services.

CB Financial is the parent company of the Bank and Exchange Underwriters, a wholly owned subsidiary of the Bank.

6 unchanged sentences

(Dollars in thousands)

March 31, 2021

June 30, 2021

Assets $ 1,461,219 $ 4,571 $ 132,559 $ ( 136,736 ) $ 1,461,613

5 unchanged sentences

Stockholders' Equity 128,984 3,054 134,530 ( 132,038 ) 134,530

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Interest and Dividend Income $ 10,798 $ 1 $ 5,825 $ ( 5,804 ) $ 10,820

1 unchanged sentence

Net Interest and Dividend Income 9,912 1 5,825 ( 5,804 ) 9,934

(Recovery) Provision for Loan Losses ( 1,200 ) — — — ( 1,200 )

Net Interest and Dividend Income After (Recovery) Provision for Loan Losses 11,112 1 5,825 ( 5,804 ) 11,134

Noninterest Income 1,002 1,209 8 — 2,219

Noninterest Expense 12,757 962 3 — 13,722

Undistributed Net Income (Loss) of Subsidiary 177 — ( 6,050 ) 5,873 —

(Loss) Income Before Income Tax (Benefit) Expense ( 466 ) 248 ( 220 ) 69 ( 369 )

Income Tax (Benefit) Expense ( 220 ) 71 3 — ( 146 )

Net (Loss) Income $ ( 246 ) $ 177 $ ( 223 ) $ 69 $ ( 223 )

Six Months Ended June 30, 2021

Interest and Dividend Income $ 21,768 $ 3 $ 7,145 $ ( 7,108 ) $ 21,808

Interest Expense 1,897 — — — 1,897

Net Interest and Dividend Income 19,871 3 7,145 ( 7,108 ) 19,911

(Recovery) Provision for Loan Losses ( 1,200 ) — — — ( 1,200 )

Net Interest and Dividend Income After (Recovery) Provision for Loan Losses 21,071 3 7,145 ( 7,108 ) 21,111

Noninterest Income 2,345 2,800 248 — 5,393

Noninterest Expense 21,147 1,964 6 — 23,117

Undistributed Net Income (Loss) of Subsidiary 585 — ( 4,750 ) 4,165 —

Income Before Income Tax Expense 2,854 839 2,637 ( 2,943 ) 3,387

Income Tax Expense 496 254 15 — 765

Net Income $ 2,358 $ 585 $ 2,622 $ ( 2,943 ) $ 2,622

Three Months Ended June 30, 2020

Interest and Dividend Income $ 11,711 $ 1 $ 1,309 $ ( 1,294 ) $ 11,727

Interest Expense 1,406 — — — 1,406

Net Interest and Dividend Income 10,305 1 1,309 ( 1,294 ) 10,321

Provision for Loan Losses 300 — — — 300

3 unchanged sentences

Undistributed Net Income of Subsidiary 148 — 1,580 ( 1,728 ) —

Income Before Income Tax Expense 3,320 591 2,857 ( 3,012 ) 3,756

Income Before Income Tax Expense (Benefit) 3,501 211 2,908 ( 3,022 ) 3,598

Income Tax Expense 627 63 5 — 695

Net Income $ 2,874 $ 148 $ 2,903 $ ( 3,022 ) $ 2,903

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Interest and Dividend Income $ 24,025 $ 1 $ 1,324 $ ( 1,294 ) $ 24,056

11 unchanged sentences

The following table presents a summary of intangible assets subject to amortization at the dates indicated.

March 31, 2021 December 31, 2020

Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value

June 30, 2021 December 31, 2020

Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value

(Dollars in thousands)

2 unchanged sentences

Total Intangible Assets $ 15,903 $ ( 8,539 ) $ ( 1,178 ) $ 6,186 $ 15,903 $ ( 7,504 ) $ 8,399

On June 10, 2021, the Agreement was executed with Citizens Bank pursuant to which Citizens Bank has agreed to assume certain deposits of the branch offices of Community Bank located in Buckhannon, West Virginia, and in New Martinsville, West Virginia.

In 2018, the Company recorded a core deposit intangible asset related to the acquisition of these two branches as part of the merger with First West Virginia Bancorp, Inc.

As a result of signing the Agreement and the expected sale of a portion of the deposits associated with the remaining core deposit intangible, the Company performed an interim evaluation to determine whether the core deposit intangible was impaired.

As a result of the evaluation, the Company determined the carrying amount of the core deposit intangible was impaired $ 1.2 million.

The Company recorded the impairment in Intangible Asset and Goodwill Impairment on the Consolidated Statements of (Loss) Income.

The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets.

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(Dollars in thousands)

9 unchanged sentences

Mortgage Servicing Rights, Net Carrying Value $ 689 $ 692 $ 689 $ 692

Amortization of MSRs and the period change in the valuation allowance are reported in Other Income on the Consolidated Statements of Income.

Real estate loans serviced for others, which are not included in the Consolidated Statements of Financial Condition, totaled $ 101.6 million and $ 105.8 million at March 31, 2021 and December 31, 2020, respectively.

Amortization of MSRs and the period change in the valuation allowance are reported in Other Income on the Consolidated Statements of (Loss) Income.

Real estate loans serviced for others, which are not included in the Consolidated Statements of Financial Condition, totaled $ 96.7 million and $ 105.8 million at June 30, 2021 and December 31, 2020, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements